Sept. 17 (Bloomberg) -- Spain’s bonds fell, with 10-year
yields climbing above 6 percent, as the nation’s debt office
said it plans to sell as much as 4.5 billion euros ($5.92
billion) of three- and 10-year securities this week.

Spanish two-year notes dropped for a third day after
European Union finance ministers meeting in Cyprus last week
failed to agree on a timetable for a more unified banking
system. Spain’s securities also declined on concern the
government will hold back from an aid request that may include
debt purchases by the European Central Bank. German bunds gained
as investors sought the region’s safest securities.

“There’s obviously a focus on the supply,” said Richard
McGuire, a senior fixed-income strategist at Rabobank
International in London. “There’s some concession building
ahead of that issuance, but then the concession building is
being exacerbated by this uncertainty as to if and when Spain
might request a bailout.”

Spain’s 10-year yield climbed 20 basis points, or 0.2
percentage point, to 5.99 percent at 4:07 p.m. in London after
rising to 6.01 percent, the highest since Sept. 7. The 5.85
percent bond due in January 2012 dropped 1.435, or 14.35 euros
per 1,000-euro face amount, to 98.99.

The country’s two-year yields rose 21 basis points to 3.35
percent after reaching 3.36 percent, the most since Sept. 4.

Spain is selling notes due in October 2015 and bonds
maturing in January 2022 on Sept. 20. The nation sold three-year
debt on Sept. 6, when demand declined as it auctioned 3.5
billion euros of the securities.

Spain Request

The sale may add pressure on Spain to make an aid request,
Deutsche Bank strategists Mohit Kumar and Abhishek Singhania in
London, wrote today in a weekly note to clients.

EU officials meeting in Cyprus on Sept. 14 disagreed over a
European Commission plan to establish joint banking supervision
from the beginning of next year. German Finance Minister
Wolfgang Schaeuble, backed by colleagues from Sweden, the
Netherlands and Poland, urged the meeting to agree on a more
cautious approach when assigning new duties to the region’s
central bank.

“The finance ministers’ meeting has come and gone and
despite the indication of willingness by the ECB to buy bonds,
we are still no closer to what many in the market consider the
ultimate endgame,” said Brian Barry, an analyst at Investec
Bank Plc in London. “Until we reach a position where their
resolve to contain yields can be tested, yields could continue
to drift higher.”

Italian Bonds

Spanish union leaders demanded Prime Minister Mariano Rajoy
test support for his budget cuts in a referendum as an estimated
65,000 protesters took to the streets of Madrid two days ago,
blocking off the center of the Spanish capital.

Rajoy travels to Rome for talks with Italian Prime Minister
Mario Monti on Sept. 21. The following day, German Chancellor
Angela Merkel will hold talks with French President Francois
Hollande at a commemoration in Ludwigsburg, Germany.

Germany’s 10-year bund yield dropped two basis points to
1.68 percent after rising to 1.73 percent, the highest level
since April 26.

Volatility on Spanish bonds was the highest in euro-area
markets today, followed by Portugal, according to measures of
10-year or equivalent-maturity debt, the spread between two-year
and 10-year securities and credit-default swaps.

Spain’s bonds returned 0.9 percent this year through Sept.
14, according to indexes compiled by Bloomberg and the European
Federation of Financial Analysts Societies. German bunds
advanced 1.7 percent and Italy’s securities rose 15 percent.